The Pricing Of Credit-Linked Note With Default Correlation Based On Copula

This paper mainly studies the pricing of credit-linked note with defaultcorrelation based on copula function. The first chapter introduces thebackground and the basic structure of the credit linked notes; the secondchapter introduces the definition of copula function and its basic nature, aswell as several commonly used copula functions; the third chapter starts fromthe probability transition matrix, induces the Q-matrix in the previous studiesand receives the single default probability in the time-homogeneous case, andlinks the single default probabilities to joint default probability with copulafunctions; the fourth chapter analyzes the pricing of the credit-linked notes,including single-name credit-linked notes and two-name credit-linkednotes,exports the pricing formula and illustrates the application of the modelthrough two examples.